Market Update 071128 http://biz.yahoo.com/mu/update.html 4:30 pm : It took most of the month but the S&P 500 finally managed to put together back-to-back winning sessions and it did so in striking fashion, scoring a two-day gain of 4.4% that was driven by a resurgent financial sector which is up 7.8% from Monday's close.
The rally on Wednesday was notable for a number of reasons, not the least of which was the understanding that it came in the face of weak economic data and a warning from Wells Fargo (WFC 30.72, +0.89) that it will be recording a special fourth quarter loss provision of $1.4 billion due largely to losses in its home equity loan portfolio.
The Wells Fargo news was an early weight on the futures market, but sentiment turned when it became apparent that Wells Fargo was indicated to start the session little changed.
The futures market, though, got a bigger jolt from a speech given by Fed Vice Chairman Donald Kohn that noted increased turbulence in the financial markets of late has partly reversed some of the improvement seen in September and October.
Kohn's comment was interpreted as a dovish signal that the FOMC will be open to the idea of cutting interest rates again at its December 11 meeting. That view was underpinned by a lackluster Durable Orders report for October, another decline in existing home sales (-1.2% in October), and a Beige Book report that made reference to an economy expanding at a slower pace.
The major indices spent the majority of Wednesday's session trading higher as the resilience of the financial sector (+5.0%) to seemingly bad news sparked a bargain hunting trade that, in turn, provoked short covering activity.
Freddie Mac (FRE 29.42, +3.69) was a standout in Wednesday's trading and representative of the bargain hunting bid that took hold as it rallied 14% after announcing a 50% cut in its fourth quarter dividend and plans to issue $6 billion in non-cumulative preferred stock. A little more than a week ago, shares of FRE plummeted 29% after the company said it would be pursuing efforts to raise capital in the near-term. Today's response speaks to the quick shift in sentiment.
Strength was broad-based with all ten economic sectors making considerable headway. The "laggard" of the bunch was the utilities sector which gained "only" 1.2%.
Another sharp decline in oil prices (-4.0% to $90.62) also played favorably for today's participants who put a healthy bid under the beaten-down consumer discretionary sector (+3.2%).
Once again, the stock market rally took the wind out of the Treasury market's sails. The 10-year note dropped 21 ticks bringing its yield up to 4.03%. DJ30 +331.01 NASDAQ +82.11 NQ100 +3.0% R2K +3.6% SP400 +3.0% SP500 +40.79 NASDAQ Dec/Adv/Vol 654/2376/2.51 bln NYSE Dec/Adv/Vol 479/2834/1.76 bln
3:30 pm : Heading into the final half-hour of trading, the major indices hit fresh session highs. The financial sector is now posting a whopping 5.1% gain. At yesterday's closing price, financials were down 21.7% year-to-date. Other beaten down areas, such as the S&P 500 Retailing Index (+5.1%) and consumer discretionary (+3.5%) are having strong days.
There are quite a few potentially market-moving reports set for pre-open tomorrow, including a preliminary read on third quarter GDP, the third quarter Chain Deflator, weekly Initial Claims and new home sales. 23 companies are confirmed to report before the open, including Sears (SHLD 116.93, +5.37).DJ30 +355.32 NASDAQ +83.37 SP500 +41.92 NASDAQ Dec/Adv/Vol 656/2340/1.95 bln NYSE Dec/Adv/Vol 506/2806/1.16 bln
3:00 pm : The major indices are vacillating around their best levels of the session. The only sector not posting a gain larger than 1% is the defensive oriented utilities.
Meanwhile, crude oil continues to slide, as it is now down 3.7% to $90.90. Gold is down 1.3% to $810.90. DJ30 +319.06 NASDAQ +73.96 SP500 +37.29 NASDAQ Dec/Adv/Vol 630/2353/1.89 bln NYSE Dec/Adv/Vol 479/2814/1.09 bln
2:35 pm : Stocks extend their gains following the release of the Fed's Beige Book before pulling back a bit. There were no real surprises in the report, but there was nothing that would indicate the Fed is against a rate cut at its December meeting. Among others, the Fed says residential real estate is "quite depressed" and that most retailers are "downbeat" and see a "slow holiday season."
As previously stated, all 10 economic sectors are in positive territory. But a closer look at the individual industry groups shows how broad-based the rally really is; 144 of the 147 S&P 500 industry groups are in positive territory. In regard to the laggards, two energy related groups are in the red following the slide in crude oil prices, and the leisure products group (-2.0%) is down due to a decline in Mattel (MAT19.96, -0.26). DJ30 +319.39 NASDAQ +75.00 SP500 +37.33 NASDAQ Dec/Adv/Vol 599/2384/1.66 bln NYSE Dec/Adv/Vol 448/2841/1.03 bln
1:55 pm : The Dow surpasses the 300 point mark as stocks extend their gains. Assuming the stock market is able to hold on to today's gains, the end of trading will mark the S&P's first back-to-back gain this month.
Reuters reports Dallas Federal Reserve Bank President Richard Fisher says he doesn't think the Fed is done getting inflation to a level where he is comfortable. His comments have not taken any wind out of the rally, which was sparked after Fed Vice Chairman Kohn's statements were interpreted as an indication of more rate cuts.
The Fed's Beige Book is due out at 14:00ET. DJ30 +317.63 NASDAQ +76.99 SP500 +36.27 NASDAQ Dec/Adv/Vol 634/2327/1.46 bln NYSE Dec/Adv/Vol 484/2770/906 mln
1:30 pm : The bullish bias persists as the stock market gets another wave of buying interest. The major indices hit fresh intraday highs following gains across all sectors.
Reuters reports that Bear Stearns (BSC 99.27, +3.84) is cutting 650 jobs from its global workforce of about 15,500 in response to subprime losses.
As equities soar, bonds are under selling pressure. The 10-year note is down 21 ticks, causing its yield to once again break above 4.0% DJ30 +284.03 NASDAQ +70.23 SP500 +33.16 NASDAQ Dec/Adv/Vol 662/2268/1.34 bln NYSE Dec/Adv/Vol 520/2732/832 mln
1:00 pm : The market is hovering around its best levels of the session, as it has for the past half-hour. The breadth of the market is bullish. At the NYSE advancers outpace decliners by a 11-to-2 ratio, while the Nasdaq comes in at 11-to-3. Volume is heavier this session than the past few days.
Similar to yesterday, the Amex Airline Index (+3.9%) and the Dow Jones Transportation Average are outperforming the broader market due to the decline in crude oil prices. DJ30 +253.79 DJTA +3.0% NASDAQ +65.49 SP500 +29.13 NASDAQ Dec/Adv/Vol 635/2275/1.22 bln NYSE Dec/Adv/Vol 505/2727/758 mln
12:30 pm : The major indices are back on the rise. They are trading at or near their best levels of the session, and are all posting gains of at least 2%.
The technology sector is performing well this session, which is aiding tech-heavy Nasdaq Composite's outperformance of the S&P and Dow. Of the 93 companies trading higher in the Nasdaq 100, Apple (AAPL 179.24, +4.43) Qualcomm (QCOM 41.53, +1.71) and Research In Motion (RIMM 120.25, +4.57) are providing leadership.
Marvell Technology Group (MRVL 15.28, -1.36) is the main laggard after the Santa Clara, Calif.-based chip maker reported that third quarter results were impacted by higher operating costs. The company also said it will cut about 400 jobs to help it meet financial targets. DJ30 +266.96 NASDAQ +68.33 SP500 +30.94 NASDAQ Dec/Adv/Vol 649/2238/1.12 bln NYSE Dec/Adv/Vol 519/2703/692 mln
12:00 pm : Stocks have rallied, as comments from a Fed official overshadowed some bearish mortgage news. At midday, the stock market is trading slightly below its session highs.
Federal Reserve Vice Chairman Donald Kohn helped fuel the rally after he said the Fed must be "flexible and pragmatic" in policy. That suggests he leans towards cutting rates at the Dec. 11 policy meeting.
In regard to the mortgage news, Wells Fargo (WFC 31.08, +1.25) announced that it will take a $1.4 billion charge in the fourth quarter to increase loan loss provisions related primarily to home equity loans. On a related note, Freddie Mac (FRE 29.56, +3.83) said last night that it cut its fourth quarter dividend by 50%, as it warned it was likely to do, and that it is aiming to sell $6 billion of preferred stock.
Investors have not been fazed by these negative headlines, considering both stocks are trading higher, and the financial sector (+3.9%) is leading the rally as investors embrace the possibility of future rate cuts.
Also providing support is a report from comScore, which noted that online sales this past Monday -- otherwise known as Cyber Monday -- rose 21% to a record $733 million. Investors have taken kindly to the data, as indicated by the 3.6% rise in the S&P 500 Retailing Index.
All 10 economic sectors are in the green, although, the defensive oriented sectors, such as consumer staples (+0.6%), are underperforming on a relative basis. Also, weakness in crude oil prices has pushed the energy sector (+0.4%) into the main laggard position.
Crude oil prices are down 2.5% to $92.10 per barrel. The weekly government inventory report showed stockpiles depleted less than expected for the week ended Nov. 23. Yesterday, prices dropped a steep 3.4% on speculation of an OPEC output increase.
On the economic front, October durable goods orders were sluggish. The news isn't all that bad because the weakness is not severe and not an indication of impending recession.
October existing home sales came in at a 4.97 million annual rate. That is close to the expected 5.0 million rate, and down 1.2% from September's 5.03 million rate. It is an extremely low level, but might be nearing a bottom as mortgage rates have dropped again recently and applications have been steady.
The median price of an existing home sale was down 5.1%, which was a bit worse than the 4.6% decline reported for September. All in all, not much surprising in the data today. DJ30 236.31 NASDAQ +60.82 SP500 +27.48 NASDAQ Dec/Adv/Vol 629/2226/990 mln NYSE Dec/Adv/Vol 529/2666/588 mln
11:30 am : Stocks are off their highs, but still hold on to substantial gains. All ten economic sectors remain in the green.
Crude oil continues to slip, as it is now down 2.5% to $92.05 per barrel. Today's decline follows the 3.4% plunge in crude oil prices yesterday. Commodities as a whole are down 0.4%, while the dollar has strengthened 0.53%.DJ30 +223.14 NASDAQ +62.40 SP500 +26.61 NASDAQ Dec/Adv/Vol 570/2242/844 mln NYSE Dec/Adv/Vol 506/2665/501 mln
11:00 am : Stocks continue to rally, as financials (+4.6%) lead the way. The Nasdaq is posting a gain in excess of 2.5%. Meanwhile, crude oil has dropped 1.7% to $92.79 after inventories had a smaller draw than was expected.
Of the top ten leading movers in the S&P 500, seven are financial companies. Two of the largest gainers, Citigroup (C 32.29, +1.99) and Bank of America (BAC 44.25, +1.30), were the topics of a Wall Street Journal article that reported Citigroup received an unexpected call from a prominent invest banker suggesting a merger with BofA. Citigroup's board dismissed the informal approach as "totally out of hand" and BofA said it never authorized a formal overture to Citigroup.
Yesterday, news that Abu Dhabi Investment Authority is going to invest $7.5 billion for a 4.9% stake in Citigroup sparked a rally. DJ30 +220.22 NASDAQ +66.16 SP500 28.51 NASDAQ Dec/Adv/Vol 538/2188/606 mln NYSE Dec/Adv/Vol 498/2621/361 mln
10:30 am : The pullback following the slightly worse than expected housing data is short-lived, as the major indices hit fresh intraday highs. The financial sector (+4.4%) continues to extend its gains.
Just reported, crude oil stockpiles for the week ended Nov. 23 had a draw of 452,000 barrels. Analysts expected stockpiles to decrease by 1.0 million barrels. Just prior to the release, crude was trading up 0.3% to $94.66. DJ30 +182.39 NASDAQ +47.26 SP500 +22.10 NASDAQ Dec/Adv/Vol 587/2067/449 mln NYSE Dec/Adv/Vol 538/2513/259 mln
10:05 am : Just hitting the wires, October existing home sales fell to a seasonally adjusted annualized rate of 4.97 million, economists expected a reading of 5.0 million. The stock market, which has extended its gains since the last update, slips a bit immediately following the report.
All ten major economic sectors are posting gains. As was the case yesterday, the financial sector (3.8%) is providing leadership with the thrifts & mortgages industry group (+6.4%) showing the most strength. The defensive oriented sectors, such as consumer staples (+0.2%) and healthcare (+0.03%), are underperforming on a relative basis.DJ30 +166.81 NASDAQ +42.86 SP500 +20.40 NASDAQ Dec/Adv/Vol 502/2006/298 mln NYSE Dec/Adv/Vol 480/2462/157 mln
09:40 am : The major indices open substantially higher, as they extended yesterday's recovery effort. The positive open is even more notable, as it comes in the face of mixed news.
One story that is definitely providing support is a report from comScore, which noted that online sales this past Monday -- otherwise known as Cyber Monday -- rose 21% to a record $733 million.
Meanwhile, Fed Vice Chairman Kohn gave futures a nice boost after he said the Fed must be "flexible and pragmatic" in policy. That suggests he leans towards cutting rates at the Dec. 11 policy meeting.
On the negative side of things, Wells Fargo (WFC) announced that it will take a $1.4 billion charge in the fourth quarter to increase loan loss provisions related primarily to home equity loans. On a related note, Freddie Mac (FRE) said last night that it cut its fourth quarter dividend by 50%, as it warned it was likely to do, and that it is aiming to sell $6 billion of preferred stock.
On the economic front, October durable goods orders were sluggish. The news isn't all that bad because the weakness is not severe and not an indication of impending recession. DJ30 +103.00 NASDAQ +35.79 SP500 +14.35
09:14 am : S&P futures vs fair value: +9.8. Nasdaq futures vs fair value: +24.0.
09:00 am : S&P futures vs fair value: +11.7. Nasdaq futures vs fair value: +27.5. Early sentiment strengthens as the S&P and Nasdaq futures extend their gains. Crude oil is trading up 0.5% to $94.82 ahead of the government’s weekly energy inventory report.
08:32 am : S&P futures vs fair value: +7.6. Nasdaq futures vs fair value: +22.0. Fed Vice Chairman Donald Kohn helps give futures a boost after he says the fed must be “flexible and pragmatic” in setting policy. Just hitting the wires, October durable orders drop 0.4%, economists expected the reading to slide by 0.1%. Futures reaction is limited to the release.
08:02 am : S&P futures vs fair value: +8.0. Nasdaq futures vs fair value: +19.8. Both the S&P 500 and Nasdaq 100 futures are trading above fair value, suggesting stocks will start the day on a positive note. The strength in futures is notable considering it comes in the face of a warning from Wells Fargo (WFC) that it will take a special fourth quarter provision of $1.4 billion. Following the announcement, Deutsche Bank lowered its price target on shares of Wells Fargo to $32 from $36. Also, Freddie Mac (FRE) said last night that it cut its fourth quarter dividend by 50%, as it had previously warned, and that it is planning to sell $6 billion in preferred stock. On a positive note, comScore reports that online sales this past Monday, known as “Cyber Monday”, rose 21% to a record $733 million.
06:14 am : S&P futures vs fair value: -3.7. Nasdaq futures vs fair value: -6.0.
06:13 am : FTSE...6161.60...+20.90...+0.3%. DAX...7584.40...+53.05...+0.7%.
06:13 am : Nikkei...15153.78...-69.07...-0.5%. Hang Seng...27371.24...+161.03...+0.6%.
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